Yen, Swiss franc rise, dollar drops as DeepSeek fuels risk concerns

The Japanese yen and the Swiss franc gained against major currencies on Monday amid a selloff in technology stocks as markets weighed the implications of a Chinese startup launching a free open-source artificial intelligence model.

China's DeepSeek rolled out a free AI assistant that it says uses lower-cost chips and less data, seemingly challenging a widespread bet in markets that AI will drive demand along a supply chain from chipmakers to data centres.

The yen and Swiss franc strengthened, while the yield on the benchmark 10-year Treasury note dropped 6 basis points to a one-month low of 4.561 per cent as investors rushed into safe-haven assets and government bonds.

 

The benchmark S&P 500 was down 1.6 per cent to 6,003.04, dragged down by technology stocks. AI chipmaker Nvidia was down nearly 14 per cent to $123.02.

"US equity markets are selling off hard and foreigners were large record buyers of US stocks in December. That is a contrarian indicator," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

"Many people were concerned already that US stocks were overvalued. DeepSeek exposes these concerns. And what it did was the US 10-year yield is down. That is why the yen and the Swiss franc have done relatively well." 

The Japanese yen rose 0.95 per cent to 154.56 against the dollar after tightening up to 153.71, its strongest since mid-December. The Swiss franc rose 0.57 per cent against the greenback to $0.90105.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,fell 0.34 per cent to 107.30, after dropping to its lowest since mid-December. The euro was up 0.09 per cent at $1.0502.

The dollar recorded its biggest weekly loss in more than a year last week on expectations that tariffs enacted by US President Donald Trump will be lower than previously feared. But concerns have resurfaced as the US and Colombia pulled back from the brink of a trade war.

The Mexican peso, a barometer of tariff worries, weakened 1.6 per cent to 20.609 per dollar. The Canadian dollar was down 0.33 per cent versus the greenback at 1.44 per dollar. Trump said last week he may impose duties on products from Canada and Mexico from Feb. 1.

"The Mexican peso is the weakest of the emerging market currencies today. I think it suffered in sympathy with Colombia and the threat of tariffs," Chandler said.

"While the Canadian dollar is down, it is doing a little bit better than the other dollar block currencies like the Aussie and kiwi."

The Australian dollar dropped 0.48 per cent versus the greenback to $0.6277. The kiwi weakened 0.53 per cent versus the greenback to $0.5679.

Major central banks, including the Federal Reserve and the European Central Bank, will meet this week after the Bank of Japan raised its rates and Governor Kazuo Ueda said last week the BoJ would keep tightening its policy as wage and price increases broaden.

The personal consumption expenditures (PCE) price index - the Fed's favourite inflation gauge - is due on Friday, while inflation data will be released from Germany, France and Japan on Friday as well.

"I think the market's going to turn cautious now ahead of Wednesday when both the Federal Reserve and the Bank of Canada meet," Chandler added.

Bitcoin fell 3.33 per cent to $101,601.14, but still traded near the record high of $109,071.86 touched last week. Ethereum declined 5.78 per cent to $3,136.05.  (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)